A New Textbook Is Published in the Spring of 2009

question 77

Essay

A new textbook is published in the spring of 2009.Your campus bookstore buys 400 copies at $70 each in June,an additional 1,000 copies in August at $72 each,and 600 copies in December at $75 each.At the end of December 2009,the bookstore has sold 1,900 copies of the text.
Find the cost of goods sold and the cost of ending inventory:
a)under the weighted average cost method.
b)under the FIFO method.
c)under the LIFO method.
Using your calculations as a guide,explain how different inventory costing methods affect the numerator and denominator of the inventory turnover ratio when unit costs are increasing.Conclude your explanation by identifying the method that produces the highest (and lowest)inventory turnover ratio.

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Definitions:

Negative Autocorrelation

A statistical property where a variable is inversely correlated with its own lagged values, implying that positive changes are likely followed by negative changes, and vice versa.

Durbin-Watson Statistic

A statistical measure employed to identify autocorrelation within the residuals of a linear regression study.

Hypotheses Testing

A statistical method used to decide whether there is enough evidence to reject a null hypothesis, based on sample data.

First-Order Autocorrelation

The correlation between adjacent observations in a time series.